Recent Decisions of ESB
- A CA Firm may register itself on UdyogAadhar, a web portal of Ministry Micro, Small and Medium Enterprises
- There is no prohibition for internal auditor of a company to acquire/purchase shares of the said Company.
- It is not permissible for a member to use WhatsApp to send messages to make people aware about his practice, and mention the services provided therein.
- A Chartered Accountant in practice being Director Simplicitor in a Company cannot sign ROC Forms of the Company as it is a direct conflict of role.
- A Chartered Accountant in practice can act as Authorized Representative of a Foreign Company, provided he is not the auditor of the said Company.
- It is permissible for two or more Chartered Accountants in practice collectively to have joint training session for their clients on GST, and share the fees collected From the clients thereof.
- A chartered accountant in practice can provide services through kiosk only if the services provided are professional activities of a practicing chartered accountant,
Permitted under the Act.
- A Chartered Accountant in service is allowed to take e-return registration if it does not conflict with employment obligation. However, he cannot certify the return.
- In case where Chartered Accountant in practice is a non-executive director in a company, he or a Firm in which he is a partner, should not accept the appointment as of a as as a as a as a statutory auditor of a Company which is a joint venture of the original Company, as it would impact independence.
- A Chartered Accountant in practice may be an equity research adviser, but he cannot publish retail report, as it would amount to other business or occupation
- A Chartered Accountant, who is a member of a Trust, cannot be the auditor of the said trust.
- A Chartered Accountant in practice may engage himself as Registration Authority (RA) for obtaining digital signatures for clients.
- A Chartered accountant can hold the credit card of a bank when he is also the auditor of the bank, provided the outstanding balance on the said card does not Exceededbeyond 10000 the prescribed credit period limit on credit card given to him.
- A Chartered Accountant in practice can act as mediator in Court, since acting as a “mediator” would be deemed to be covered within the meaning of “arbitrator’; which is inter-alia permitted to members in practice as per Regulation 191 of the Chartered Accountants Regulations, 1988.
- A Chartered Accountant in practice is not permitted to accept audit assignment of a bank in case he has taken loan against a Fixed Deposit held by him in that Bank.
- The Ethical Standards Board in 2013 generally apply the stipulations contained in the then amended Rule 11U of Income Tax generally, wherein statutory auditor /tax Auditor cannot be the valuer of unquoted equity shares of the same entity.The Board has at its recent Meeting (January, 2017) has reviewed the above, and decided that where law prohibits for instance in the Income Tax Act and the rules framed there under, such prohibition on statutory auditor/tax auditor to be the valuer will continue, but where there is no specific restriction under any law, the said eventuality will be permissible, subject to compliance with the provisions, as contained in the Code of Ethics relating to independence.
- The Ethical Standards Board had in 2011 decided that it is not permissible for a member who has been Director of a Company, upon resignation from the Company to be appointed as an auditor of the said Company, and the cooling period for the same may be of 2 years. The Board has at its recent Meeting (January, 2017) has reviewed the above, and noted that the Section 141 of Companies Act, 2013 on disqualification of Auditors do not mention such prohibition; though threats pertaining to the said eventuality have been mentioned in Code Of Ethics.Further, the Board was of the view that a member may take decision in such situation based on the provisions of Companies Act, 2013 and provisions of Code of Ethics.
- A chartered accountant in practice cannot become Financial Advisers and receive fees/commission from Financial Institutions such as Mutual Funds, Insurance Company and NBFCs etc.
- A chartered accountant cannot exercise lien over the client documents/records for non-payment of his fees.
- It is not permissible for CA Firm to print its vision and values behind the visiting cards, as it would result in solicitation and therefore would be violation of the provisions of Clause (6) of Part-of Clause(6) of Part I of First Schedule to the Chartered Accountants Act, 1949.
- It is not permissible for chartered accountants in practice to take agencies of UTI, GIC or NSDL.
- It is permissible for a member in practice to be a settlor of a trust.
- A member in practice cannot hold Customs Brokers Licence under section 146 of the Customs Act, 1962 read with Customs Brokers licensing Regulations, 2013 in terms of the provisions of Code of Ethics.
- A Chartered accountant in service may appear as tax representative before tax authorities on behalf of his employer, but not on behalf of other employees of the Employer.
- A chartered accountant who is the statutory auditor of a bank cannot for the same financial year accept stock audit of the same branch of the bank or any of the branches of the same bank or sister concern of the bank, for the same financial year.
- A CA Firm which has been appointed as the internal auditor of a PF Trust by a Government Company cannot be appointed as its Statutory Auditor.
- A concurrent auditor of a bank ‘X’ cannot be appointed as statutory auditor of bank ‘Y’, which is sponsored by ‘X’.
- A CA/CA Firm can act as the internal auditor of a company & statutory auditor of its employees PF Fund under the new Companies Act (2013).
- The Ethical Standards Board while noting that there is requirement for a Director u/s 149(3) of the Companies Act, 2013 to reside in India for a minimum period of
182 days in the previous calendar year, decided that such a Director would be within the scope of Director Simplicitor (which is generally permitted as per ICAI norms) , if he is non –executive director, required in the Board Meetings only , and not paid any remuneration except for attending such Board Meetings.
A member in practice engaged as Karta of a Hindu undivided Family (HUF) doing family business (under s.n. 4 of “Permission to be granted specifically” of Appendix 9 to the Chartered Accountants Regulations, 1988)will be within the limits prescribed by Council if he makes investments from the funds pertaining to HUF only, provided he is not actively engaged in the management of the said business.
Clarifications on some commonly asked queries pertaining to elected representatives of ICAI and the general members of ICAI
Clarification on prohibition of simultaneously undertaking Concurrent Audit and Quarterly Review of the same Bank
Clarification on prohibition of simultaneously undertaking Concurrent Audit and Quarterly Review of the same Bank. - (02-04-2014) Since queries are being received from members at large on the issue, it is accordingly hereby clarified that concurrent audit and the assignment of quarterly review of the same Bank cannot be undertaken simultaneously as the concurrent audit being a kind of internal audit and the quarterly review being a kind of statutory audit undertaken simultaneously are prohibited under the provisions of ‘Guidance Note on Independence of Auditors’.
As per Chapter VI of Council General Guidelines, 2008 (Tax Audit Assignments under Section 44AB of the Income Tax Act, 1961), a member of the Institute in practice shall not accept, in a financial year, more than the specified number of tax audit assignments as prescribed under Section 44AB of the Income Tax Act, 1961. The specified number of tax audit assignments under Section 44AB of the Income Tax Act, 1961 is 45.
It is further provided in Chapter VI of Council General Guidelines, 2008 that in case of firm of Chartered Accountants in practice, specified number of tax audit assignments means 45 tax audit assignments per partner of the firm, in a financial year.
Therefore, if there are 10 partners in a firm of Chartered Accountants in practice, then all the partners of the firm can collectively sign 450 tax audit reports. This maximum limit of 450 tax audit assignments may be distributed between the partners in any manner whatsoever. For instance, 1 partner can individually sign 450 tax audit reports in case remaining 9 partners are not signing any tax audit report.
It is needless to say that the tax audit assignment should be in accordance with the Standard on Quality Control (SQC) 1: Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements.
Note:-The Council at its 331st meeting held from 10th to 12th February, 2014 decided to increase the "specified number of tax audit assignments" for practicing Chartered Accountants, as an individual or as a partner in a firm, from 45 to 60. The said limit will be effective for the audits conducted during the financial year 2014-15 and onwards.
Last updated on 30th August, 2017
The members of the profession have sought the Institute’s view as to whether the Chartered Accountants in Practice acting as Recovery Consultant for recovery of Non-Performing Assets (NPA) of Banks under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SRFA&ESI) can charge fee on percentage basis as is permitted under Regulation 192 of the Chartered Accountants Regulations, 1988 for ‘receiver’ or ‘liquidator’.The Institute has examined the matter in detail and is of the view that Recovery Consultant cannot be equated with ‘receiver’ or liquidator’ provided under Regulation 192 of the Chartered Accountants Regulations, 1988 and as such, the charging of fee by Recovery Consultant in Banking Sector on percentage basis is not permissible.
Clarification regarding inclusion of "Insurance Financial .Advisory Services under the Insurance Regulatory and Development Authority Act, 1999 including Insurance Brokerage” in the definition
of Management Consultancy Services.
Sub:Clarification regarding Inclusion of "Insurance Financial Advisory Services under the Insurance Regulatory & Development Authority Act, 1999, including Insurance Brokerage" in the definition of "Management Consultancy & Other Services"
The attention of the members is drawn to the Announcement published in the January 2005 issue of the Journal at page 935 as well as hosted in the website regarding inclusion of "Insurance Financial Advisory Services under the Insurance Regulatory & Development Authority Act, 1999, including Insurance Brokerage" in the definition of "Management Consultancy and Other Services" as appearing at pages 8-10 of Code of Ethics, January 2001 edition.
In this regard, it may be clarified that as per the decision of the Council, a member is permitted to render Insurance Financial Advisory Services as prescribed under "The Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2002" only in Corporate form. Further, the members are required to comply with the conditions prescribed by the Insurance Regulatory & Development Authority and the conditions to be prescribed by The Institute of Chartered Accountants of India.
It may also be clarified that the members are not permitted to do any work relating to insurance agency as prescribed under "Insurance Regulatory and Development Authority (Licencing of Insurance Agents) Regulations, 2000" and "Insurance Regulatory and Development Authority (Licencing of Corporate Agents) Regulations, 2002", either individually or in partnership/proprietorship form or in corporate form.
The existing position regarding allowing members generally to hold life insurance agency licence for limited purpose of getting renewal commission, still hold good as provided in the Appendix (9) to the Chartered Accountants Regulations, 1988 (2002 edition).
The Institute came across certain Circulars / Orders issued by the Registrars of various State Co-operative Societies wherein it has been mentioned that certain amount of audit fee is payable to the concerned State Government and the auditor has to deposit a percentage of his audit fee in the state Treasury by a prescribed challan within a prescribed time of the receipt of Audit fee. Recently, the Council considered the issue and while noting that the Government is asking auditors to deposit such percentage of their audit fee for recovering then administrative and other expenses incurred in the process, the Council decided that as such there is no bar in the Code of Ethics to accept such assignment wherein a percentage of professional fees is deducted by the Government to meet the administrative and other expenditure.
Clarification regarding (1) Listing with bodies creating data-base for independent directors of Chartered Accountants and (2) acting as E-Intermediary.
Clarification on Chartered Accountants acting as Direct Selling Agent (DSA) - Ethical issues involved
Transfer of goodwill of the firms of Chartered Accountants are permitted by the Institute subject to fulfillment of the following procedures :-
An application in writing should be forwarded by a member, holding Certificate of Practice, intimating his intention to purchase goodwill.
The application should be made within 1year from the date of death of the member.
The application should be sent alongwith the following details :-
Death Certificate' of the deceased member; and
(i) A draft sale deed for sale/transfer of goodwill entered into between the legal heir/s of the deceased and the member intending to purchase goodwill.
(ii) The sale of goodwill deed must be very clear as to the amount of consideration and payment thereof in one or more installment(s) to be paid within a specified period. The consideration should not be contingent upon future profit.
Documents, such as, succession certificate or will, legal Heir Certificate or an affidavit sworn by all legal heir/s stating that there is/are no other legal heir to the deceased member.
Legal heir, in this context, means spouse, child/children and parents.
If the agreement is entered into by one of the legal heirs, 'No Objection' from the other legal heirs, except those minor, are also required to be submitted. In case of minor, 'No Objection' is to be obtained from the guardian.
The member intending to purchase the goodwill should give an advertisement about his intention to purchase such goodwill, and the advertisement should spell out that anyone having objection thereto should send the objection directly to the respective DCO (address of which shall be indicated in the advertisement). A copy of the advertisement so published should be sent by the intending purchaser to the concerned DCO.
Within 30 days of the receipt of the approval, for transfer of goodwill, Form '18' should be filed by the member purchasing the goodwill.
The members are requested to comply with the above procedure and submit documents mentioned above, while applying for transfer of goodwill of a Chartered Accountant Firm.
Clarification on whether the Auditor of a Subsidiary Company can be a Director of its Holding Company.
A Member has sought the Institute’s view as to whether the Auditor of a Subsidiary Company can be a Director of its Holding Company. Company.
The Committee on Ethical Standards (CES) a non-standing Committee of the Institute, has examined the issue in detail. The Committee noted that in terms of Clause (11) of Part I of the First Schedule to the Chartered Accountants Act, 1949 a Chartered Accountant in practice can not engage (unless permitted by the Council so to engage) in any business or occupation other that the profession of Chartered Accountant but he can be a director of a Company (not being a managing director or whole time director) wherein he or any of his partners is not interested in such Company as an auditor. The Committee further noted that Public conscience is expected to be ahead of the law. Members, therefore, are expected to interpret the equirement as regards independence much more strictly than what the law requires and should not place themselves in positions which would either compromise or jeopardise their independence. In view of the above the Committee has decided that the auditor of a Subsidiary Company can’t be a Director of its Holding Company, as it will affect the independence of an auditor.
Internal Auditor not to undertake Goods and Service Tax (GST) Audit simultaneously
We have received enquiries from the members at large and other stakeholders as to whether an internal auditor of an entity can also undertake GST Audit of the same entity as required under the Central Goods and Service Act, 2017. The Council of the Institute, while considering the issue at its 378th Meeting held on 26th and 27th September, 2018, noted its earlier decision taken at its 281st Meeting held from 3 rd to 5th October, 2008, that internal auditor of an assesee, whether working with the organization or independently practising Chartered Accountant being an individual chartered accountant or a firm of chartered accountants, cannot be appointed as his Tax auditor (under the Income Tax Act, 1961). Upon consideration, the Council has decided that based on the conflict in roles as statutory and internal auditor simultaneously, the bar on internal auditor of an entity to accept tax audit (under Income Tax Act, 1961) will also be applicable to GST Audit (under the Central Goods and Service Act, 2017). Accordingly, it is clarified that an Internal Auditor of an entity cannot undertake GST Audit of the same entity. 28.9.2018
- Use of Designation(s) other than the designation of “Chartered Accountant
It has been brought to the notice of the Institute that some members are using the certain designation (s) other than Chartered Accountant in addition to the designation “Chartered Accountant’. In this regard, the attention of the members is drawn on Item (7) of Part-I of First Schedule to the Chartered Accountants Act, 1949 which provides that a Chartered Accountant in practice shall be deemed to be guilty of professional misconduct if he uses any designation or expressions other than chartered accountant on professional documents, visiting cards, letter heads or sign boards, unless it be a degree of a University established by law in India or recognised by the Central Government or a title indicating membership of the Institute of Chartered Accountants of India or of any other institution that has been recognized by the Central Government or may be recognised by the Council. Further, attention of the members is also drawn to the following paras appearing at page no. 154 of the Code of Ethics, 2009 under commentary of Item (7):- “It is improper for a Chartered Accountant to state on his professional documents that he is an Income-tax Consultant, Cost Accountant, Company Secretary, Cost Consultant or a Management Consultant”. “While noting that it had already allowed its members to appear before the various authorities including Company Law Board, Income Tax Appellate Tribunal, Sales Tax Tribunal where the law has permitted the same, so far as the designation “Corporate Lawyer” is concerned, the Council was of the view that as per the existing provisions of law, a Chartered Accountant in practice is not entitled to use the designation “Corporate Lawyer”. “The members are not permitted to use the initials ‘CPA’ (standing for Certified Public Accountant) on their visiting cards”. “Members of the Institute in practice who are otherwise eligible may also practice as Company Secretaries and/or Cost Accountants. Such members shall, however, not use designation/s of the aforesaid Institute/s simultaneously with the designation “Chartered Accountant”. Section 7 of the Chartered Accountants Act, 1949 also provides that every member of the Institute in practice shall, and any other member may, use the designation of a chartered accountant and no member using such designation shall use any other description, whether in addition thereto or in substitution therefor unless such descriptions indicate the membership of any other accounting body recognized by the Council in this behalf or the qualification he may possess. In view of the above, though the members are allowed to use the description as to their qualifications however members are not permitted to use any other designation along with the designation ‘Chartered Accountant’. Members are therefore advised to abstain from using any other designation with the designation ‘Chartered Accountant’ failing which they may be liable for disciplinary action, as per the provisions of the Chartered Accountants Act, 1949 and Rules/Regulations framed there under.
Announcement On prohibition to undertake the assignment of audit and accounting work together for the same entity - (26-05-2014)
It has come to the knowledge of some members that certain entities , while inviting tenders for services of chartered accountants for the assignment of statutory audit , are mentioning accounting and book keeping related works in the scope of works required to done by the auditor. Members are hereby advised not to undertake such assignment since it is violation of the provisions of 'Code of Ethics' and 'Guidance Note on Independence of Auditors' for auditor of an entity to do book keeping work of the entity. The said prohibition in the case of Companies is further also mentioned in Section 144 of the Companies Act, 2013.
Announcement on Ranking of CA Firms
It has been brought to the notice of some members that certain entities are seeking details of the Chartered Accountants firms, for the purpose of making ranking of the various Firms through comparison of different parameters. In this regard, Members are hereby informed that sharing of details of their Chartered Accountants firms in the aforesaid manner does not fall within the permitted categories , and would therefore be violation of Item 6 of Part-I of First Schedule to The Chartered Accountants Act, 1949 . Further, as it is known beforehand that the information regarding firms would be used for ranking purposes, the sharing of such details would tacitly result in claiming superiority of one firm over other, which is prohibited in terms of the Advertisement Guidelines of the ICAI under Item 7 of Part –I of First Schedule to The Chartered Accountants Act, 1949. Members are therefore advised to abstain from such sharing of details of their Chartered Accountants Firms.
Announcements - Amendment in Council General Guidelines , 2008 (Issued : June, 2011) - (29-07-2011)
All the members of Institute of Chartered Accountants of India (ICAI) are hereby informed that in terms of the Council decision taken at its 306th Meeting held on 7th - 8th June, 2011, the Chapter-XII (Minimum Audit Fee in respect of Audit) of the Council General Guidelines, 2008 appended to the ICAI publication titled “ The Chartered Accountants Act, 1949” has been repealed with effect from 7th June, 2011.
Announcements - Definition of Relative in Chapter-IV of the Council General Guidelines, 2008 ( Issued : June, 2011) - (29-07-2011)
All the members of the Institute of Chartered Accountants of India (ICAI) are hereby informed that in terms of its decision taken at the 299th Meeting of the Council held on 27th – 28th October, 2010, it has been decided that the term “relative” for the purpose of Chapter-IV of Council General Guidelines, 2008 (Opinion on Financial Statements when there is substantial interest) will have the same meaning as assigned to it in AS-18. Accordingly, the Chapter IV of the Council General Guidelines, 2008 as appended to the ICAI publication titled “The Chartered Accountants Act, 1949 “ is modified and modified version shall read as under - “Chapter IV Opinion on financial statements when there is substantial interest 4.0 A member of the Institute shall not express his opinion on financial statements of any business or enterprise in which one or more persons who are his “relatives” within the meaning of Accounting Standard (AS - 18) has / have, either by themselves or in conjunction with such member, a substantial interest in the said business or enterprise. Explanation: For this purpose and for the purpose of compliance of Clause (4) of Part I of the Second Schedule to the Chartered Accountants Act, 1949, the expression “substantial interest” shall have the same meaning as is assigned thereto under Appendix (9) to the Chartered Accountants Regulations, 1988. “ This decision shall be in force with effect from 28th June, 2011
Requirement of earnest or deposit money while responding to tenders or enquirers issued by various users of professional services or organizations from time to time.
The Council at its 301st meeting held on 20th -22nd December, 2010 while accepting the recommendations of Ethical Standards Board interference with the practices prevailing for requirement of EMD/Deposit is not required.However, on having received complaint/instance of exorbitant EMD/Deposit, the Ethical Standards Board will look into the matter on case to case basis. The Council also decided that a cost sheet be maintained by members of the Institute responding to tenders and accepting the professional work based thereupon, incorporating details of the costs being incurred therein having regard to number of persons involved, hours to be spent,etc,so that the same may be called for by the Institute for perusal.
Form of Complaint/Statement of Reasons for unjustified removal of auditor to be filed before the Ethical Standards Board.
As the members are aware, the Institute has a Committee namely, the Committee on Ethical Standards & Unjustified Removal of Auditors (CESURA) to examine various issues of professional ethics and to address the grievances of unjustified removal of auditors.Recently, while discussing the existing procedures for dealing with the cases of unjustified removal of auditors, the Council extended the power and scope of functioning of the Committee. As per the additional power, the Committee has been authorised to consider the cases of unjustified removal/non-reappointment of inconvenient auditor due to his alleged qualificatory remarks/queries.In this regard, an announcement has been published in the December 2002 issue of the Institute's Journal, `The Chartered Accountant'.To standardize and expedite the filing of the complaint before the Committee, the form of the complaint and the list of enclosures to be submitted along with the Complaint/Statement of Reasons have been approved and are as follows: -The Institute of Chartered Accountants of India, I.P. Marg, New Delhi-2
FORM OF COMPLAINT/STATEMENT OF REASONS Before the Committee on Ethical Standard Unjustified Removal of Auditors (CESURA)
Note-to be submitted with a filling fee of Rs. 1000/- drawn in favor of the Secretary ICAI, New Delhi together with the list of enclosures mentioned below:-
1. Name of the Complainant :
Membership No. -
Phone No. -
E-mail address -
2. Name of the Incoming Auditor -
Membership No. -
Phone No. -
E-mail address -
3. Name & address of the Entity -
Phone No. -
E-mail address -
4. Particulars of complaint/ Statement
of Reasons leading to removal /
non-reappointment [Please attach
separate sheet for details) -
5. Particulars of evidence, oral and
documentary, if any, to substantiate
the complaint [Please see the list at
Annexure `B' for suggested documents
to be attached) -
6. Relief sought from the Committee
including the interim order. -
7. Reasons/justifications for Interim Order. -
8. Any legal prosecutions initiated and their
status including all the relevant documents. -
I, .................................... the Complainant do hereby declare that what is stated above is true to the best of my information and belief. Verified today, the ................... day of ...... 20
Enclosures to be submitted along with the Complaint/Statement of Reasons:
Certified true copies of the following documents:
Engagement Letter of the Complainant and Resolution for engagement of the Complainant;
Documents/evidence indicating removal/non-reappointment of the Complainant;
Relevant correspondence exchanged between the Complainant and Incoming Auditor;
Relevant correspondence exchanged between the Complainant and entity;
Copy of Certificate/Audit Report and other Certificates/Draft Audit Report/ Qualifications/Final accounts which lead to his removal, if any;
Extract of the Relevant Rules/Regulations for engagement of Auditor
Any other relevant papers/documents on the issues involved.